WHOLE FOODS SEES INCREASING CONSUMER INTEREST 2004-03-29 (1)

MINA WILLIAMS

SEATTLE (FNS) -- The addition of natural and organic products to the offerings of traditional supermarket retailers is only increasing interest in Whole Foods Markets, the company told shareholders at its annual meeting here last week.

While traditional supermarket retailers are picking up the top stockkeeping units that Whole Foods offers, those retailers are creating a "gateway" to Whole Foods, John Mackey, chairman, president and chief executive officer of the Austin, Texas, chain, told attendees during what the company referred to as a "tribal gathering."

"Our brand stands for something in the customer's mind," he said. "We are a differentiated lifestyle brand."

While last year's annual meeting ended with a protest over animal welfare, this year's meeting was protest-free. Mackey did address the animal-welfare issue, however, saying that Whole Foods plans to change the paradigm for animal production, raising the bar for the humane treatment of animals above the chain's already stringent standards. A non-profit foundation has been set up to network globally on the issue.

During the question-and-answer period, Mackey said the company was using its store brands to try to create a perception of value, but higher prices are a natural by-product of adhering to the company's mission of offering high quality.

"We recognize the perception [of having high prices] and attempt to address it," he said. "We will never be the cheapest out there, [but] we are always finding ways to lower prices. We are using our 365 brands and our private-label strategy to offer value."

Mackey reiterated statements he made at the end of the first quarter about seeking more store density in existing markets.

Using the West Los Angeles market as an example, he said that the optimal five-mile radius between stores has shrunk to about one mile without interrupting the success of individual units. "This type of saturation is a possibility in other markets," he said. "No markets are saturated."

The company's goal is to reach $10 billion in sales by 2010, Mackey said. To reach that goal, he said that doubling the store base with larger units will be required. Currently, 39 units are in the development pipeline, averaging 45,000 square feet each.

"The larger a store is, the better it does," he said. "It enables us to do bigger perishable departments with more space.

"We are constantly looking for real estate, but we are patient. It took us a long time to open our first location in New York City, for example."

He said the newest New York location at Columbus Circle store is now the chain's No. 1 in sales after being open just one month.

Mackey outlined how international expansion is also expected to contribute to the chain's growth. Three units are now open in Canada. Whole Foods' acquisition of the seven-store Fresh & Wild chain will serve as a platform for expansion in the United Kingdom and elsewhere in Europe, he said, adding that larger stores in London and New York are in the works.